Budget FY Karen Rhodes-Whitley, RTA/C, CPM Director of Budget and Research

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1 Budget FY Karen Rhodes-Whitley, RTA/C, CPM Director of Budget and Research

2 FUND BASICS: What are Funds? What are the Type of Funds? Why to Budget?

3 3 Funds and Fund Balance City finances are organized on the basis of Funds based on function and purpose Each Fund is a separate, self-contained set of accounts, assets, liabilities, revenues and expenditures Smaller cities can operate with only one fund Plano has over 120 funds Each fund must operate as a separate entity

4 FUND TYPES - Government 1 of 3 Governmental Funds: account for operations not normally found in business General Fund used to account for all financial resources except those required to be accounted for in another fund. Resources are generated by property and other taxes, franchise fees, fines, licenses and fees for services. Operating expenditures support the service provided by the following functional areas: general government, public safety, public works and community services. Example: General Fund = 01

5 FUND TYPES Governmental 2 of 3 Governmental Funds continued: Special Revenue Funds account for the accumulation and disbursement of restricted resources. Examples: Grant Fund, PTN Fund, Criminal Invest. Fund, Muni. Court Tech. Fund. Debt Service Fund accounts for the accumulation of resources for, and the payment of, general long-term debt principal and interest. The resources of this fund are generated by a tax levy based upon property values. Payments of principal and interest are made from this fund for general obligation bonds, certificates of obligation and notes payable when due throughout the year.

6 FUND TYPES Governmental 3 of 3 Governmental Funds continued: Capital Projects Funds account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary type funds). Examples: Municipal Facilities Fund, Park Improvement Fund, Street Improvement Fund, Capital Reserve Fund Special Assessment Funds account for financial resources received from special charges levied on property owners who benefit from a particular capital improvement or service. Examples: Street Lighting Districts

7 FUND TYPES Propriety 1 of 2 Proprietary Fund: account for records of operations similr to those found in business Enterprise Funds account for operations that are financed and operated in a manner similar to private business where the intent of the City is that costs of providing the goods or services to the general public on a continuing basis will be financed or recovered through user charges. Examples: Water & Sewer Fund, Sustainability & Environmental Services Fund, Convention & Tourism Fund, Golf Course Fund, Municipal Drainage Fund, Recreation Revolving Fund.

8 FUND TYPES Proprietary/Fiduciary Proprietary Funds continued: Internal Service Funds account for the financing of goods or services provided by one department for another. Examples: Equipment Maintenance Fund, Municipal Warehouse Fund, Technology Services Fund, Property/Liability Loss Fund, Health Claims Fund. Fiduciary Funds: also referred to as trust or agency funds account for assets held by a governmental unit in a trustee capacity or as an agent. Example: Law Enforcement Trust, RSP Truct

9 BUDGET BASICS Why Budget? What is Balanced? General Fund Issues/Highlights

10 Why Budget the Funds? In summary, the purpose of budgeting is to: 1. Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out. 2. Enable the actual financial operation of the business to be measured against the forecast. 3. Legal requirements 4. Improve public accountability and transparency

11 11 What is a Balanced Budget? Balanced Budget Beginning Balance + Revenues >= Expenditures - Required by state law Structurally Balanced Budget Revenues >= Expenditures No use of fund balance to pay for expenses

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14 Property Tax Basics Revenue based upon value of property Determined by outside agency Appraisal District determines market value City does not determine value of property Appraisal District does not set the tax rate

15 Elements of Property Tax Rate Operations and Maintenance (O&M) Funds on-going General Fund operations Interest and Sinking (I&S) Funds payments on debt for general government (not utility related) improvements Tax Rate = O&M rate + I&S rate Calculation: Tax rate x taxable value/$100 = your City tax levy ($ paid to City)

16 Property Tax Definitions Effective Tax Rate A calculation, based upon new valuations, that gives the City the exact dollars in revenue as generated in the previous year Rollback Rate Taxpayers may petition for rollback tax election if City proposes tax increase over the rollback rate Rollback rate = sum of: 8% increase over the effective O&M rate, + I&S rate Above 8% increase in O&M rate could trigger a rollback election

17 Truth in Taxation (aka TNT) State laws that regulate public hearings & published notices for taxing entities Requires Effective Rate calculation be published If proposed tax rate is = or < then Effective Rate No further action is required prior to adoption If proposed tax rate > then Effective Rate Notices and Public Hearings are required Some exceptions for smaller cities or districts

18 The Effective Tax Rate is basically the tax rate you would pass to collect the same tax revenue as last year (FY ) using this year s (FY ) appraised values.

19 EFFECTIVE TAX RATE

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22 The Rollback Rate allows a taxing unit to raise the same amount for operations as in the prior year plus provides for an additional 8% cushion.

23 ROLLBACK RATE

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25 52% 52% 53% 52% 50% 49% 50%

26 $1,039 $1,223 $1,273 $1,309 $1,379 $1,436 $1,550 $1,689 $1,696 $1,724 $1,819 AD VALOREM TAX RATES Residential Customers Only With Homestead Exemption Applied to the Rate Plano and Surrounding Cities Adopted Tax Rates Based on Plano Average Home Value of $265,930 (Cents per $100 Valuation) (48.86) (59.86) (61.54) (64.80) (79.70) (70.46) (85.50) Plano Frisco* Irving Carrollton Arlington Allen* McKinney* Richardson* Dallas Garland Ft. Worth * Cities do not offer Homestead Exemption

27 LOST REVENUE FROM AD VALOREM TAX EXEMPTIONS Average Home Value **Total Exemptions APV Lost Revenue From Exemptions Lost Revenue Over-65 Tax Freeze FY $251,733 $4.91 billion $23.2 million $604,117 FY $249,679 $5.10 billion $24.5 million $765,884 FY $245,802 $5.21 billion $25.4 million $779,912 FY $245,074 $5.22 billion $25.5 million $771,923 FY $243,118 $5.37 billion $26.2 million $753,197 FY $248,817 $5.53 billion $27.0 million $780,493 FY $265,930 $6.30 billion $30.8 million $1,056,114 **APV is Assessed Property Value

28 TAXES AND THE AVERAGE HOME ADOPTED TAX RATES Average Home Value $ 265,930 Tax Rate $ Amount % City of Plano.4886 $1, % PISD $3, % Collin County.2350 $ % CCCCD.0819 $ % TOTAL TAXES/YEAR $5, % Using the Adopted Tax Rate and the 2014 Average Home Value, this assumes that the General Homestead Exemptions were taken for the City of Plano (20%), for PISD ($15,000), and Collin County (5%).

29 City CITY TAX COMPARISON 2014 Tax Rate Homestead Exemption Tax on $125,000 Home Tax on Tax on $250,000 Home $400,000 Home Allen $675 $1,350 $2,160 Carrollton % $615 $1,231 $1,969 Dallas % $797 $1,594 $2,550 Frisco $575 $1,150 $1,840 Garland % $810 $1,621 $2,593 McKinney $729 $1,458 $2,332 PLANO % $489 $977 $1,564 Richardson $794 $1,588 $2,541 Murphy $713 $1,425 $2,280 Wylie $1,099 $2,197 $3,516 Fort Worth % $855 $1,710 $2,736 Arlington % $648 $1,296 $2,074

30 30 Policy Review & Benchmarking Review policies annually during the budget process Clarify areas that may be confusing Look for new ways to improve the policy Example: Addition of a revenue shortfall contingency plan

31 31 Trend Analysis Ratios & Trend Analysis Financial indicators with acceptable levels General Fund includes: Fund balance/equity Working Capital Current Ratio Debt Ratio Track trends and compare to other like communities (benchmarking)

32 32 Conclusion Allow policies to guide City s financial operations Adhere to the guidelines addressed in the policies Benchmark to ensure policies are reasonable and achieve desired goals Communicate policies and guidelines to citizens and employees

33 33 Technical Resources GFOA Best Practices Elected Officials Guide Series TML Series GFOAT - Finance Forum

34 34 Questions? Contact info: Martie Simpson, Executive Director of Finance, City of Killeen Karen Rhodes-Whitley Director of Budget & Research, City of Plano